Instagram, CanvasPop and the money riddle

There is a trend that is obvious and it goes like this: a company, vying for users and mass distribution, builds a product, opens up their innards in the form of an API and hopes it can create an ecosystem to ensure longevity as other companies build their businesses on top of those APIs.

There is nothing controversial here at all – seems like a logical process: Build + enable = user adoption. In fact this has become a defacto business model for this generation. But at some point someone needs to ask a very simple question: How does the company that is building the ecosystem make money?

Instagram, everyone’s favourite photo/filter/sharing app on iPhone (mine included), is a perfect example of this in action. They have an active user base of over 13 million yet haven’t turned on the revenue spigot yet but their ecosystem is heating up.

One of the companies to recently announce a service that hugs off the Instagram API is Ottawa-based CanvasPop. Their business is to take any photo you have and turn it into hangable art on canvas. They can make your worst quality digital photo seem like a work of art (very similar to what Instagram does) that you feel comfortable hanging on your wall.

CanvasPop has opened up their services to take your Instagram photos and have them printed on canvas breathing life into your digital throwaways. They are doing this to make money. They are doing this because there is a strong and fiercely loyal user base already snapping one photo per second with Instagram. They are doing this because they have a service that can make money from someone else’s clients.

This is important because at what point does the owner of the user, in this instance Instagram, become marginalized by the companies making money off of their service. Every time someone buys a print of an Instagram photo from CanvasPop, Instagram loses a revenue opportunity while CanvasPop gains a sale and a future marketing opportunity. Essentially, CanvasPop has shown more value – one that someone is actually willing to pay for – than the originator in Instagram.

User hoarding is a problem in the app economy but it is smart companies like CanvasPop that can use this to their advantage. Adding a small amount of value to an existing user base and charging for it is pure profit.

UPDATE: With a wonderful sense of timing, The Verge has posted a story today on Printstagram, a San Francisco-based company that will print you Instagram photos on Polaroid-like matte cards, stamp-sized stickers or magnet-backed books. I’d be remiss if I also didn’t mention my interview with Sincerely co-founder, Matt Brezina. Sincerely’s Postagram service leverages Instagram to send a postcard of your photo to anyone, anywhere, for 99 cents.

About the author

Rob Woodbridge

I'm Rob, the founder of UNTETHER.tv and I've spent 14 years immersed in the mobile and pervasive computing world. During this great time I've helped some of the most innovative companies grow their business through mobile. If you are in need of a mobile business advisor or coach, connect with me here to get things rolling.

You know Rob, I can’t argue with you. I just think that Instagram is more focused on creating a huge community of obsessed fans, their monetization will come either through a gigantic acquisition or by offering virtual goods (such as advanced filters or pro-accounts). The folks at Instagram have a bigger plans at hand. We approached them seeking a more integrated partnership but they were happy to simply allow us to use their API for the time being because at the end of the day, the more companies like us join their eco-system the more they gain in value. Hipstamatic has a more closed island approach (yes they sell their own stuff) but Instagram has many more users. In time we will see which approach pays off the most. PS: Matt Brezina and the boys at Postagram are great, we had a chance to meet them in person last month in SF.

I hear you Adrian. I guess the thing I wonder about is the size of this opportunity. I’d simply rather know if I can turn my company into something that makes money (not just a little money) before I wake up with 13 million users and no way of making a living. This will be the harsh reality for many companies being formed today.

I LOVE instagram – use it all the time – so this comes out of pure desire to see it and companies like it survive. As for Matt and his team at Sincerely – love them and think the world of what they are doing: The Hallmark of the mobile age. Love it.